Ex-Morgan Stanley Analyst Hit With Insider-Trading Charges
AUG 02,1999
NEW YORK -(Dow Jones)- Insider-trading charges were filed against a
24-year-old former analyst at Morgan Stanley Dean Witter Reynolds and a friend
by the San Francisco U.S. attorney's office. The analyst allegedly devised his
scheme before earning a paycheck.
The Securities and Exchange Commission and federal prosecutors Monday
charged Morgan Stanley analyst Brett Henderson and his long-time friend,
Richard Randall, with insider-trading in nine high-tech stocks. Henderson was
an analyst in the investment bank and corporate finance division of Morgan
Stanley's Menlo Park, Calif., office from September 1998 until last month, the
SEC said.
The agency alleges that before taking the job, Henderson promised he would
tip Randall, a high-school teacher in Urbana, Ohio, about information he
learned at work. The two agreed that Randall would provide cash to conduct
trading and split the profits with Henderson in a 60%-40% arrangement. "Within
days of starting work, he started tipping," said Helene Morrison, assistant
district administrator in the SEC's San Francisco office.
According to the SEC, Henderson and Randall illegally traded in stock or
options of various Morgan Stanley Dean Witter clients, including Broadcom
Corp., Netscape Communications Corp., i2 Technologies Inc., Manugistics Group
Inc., Xylan Corp., Broadcast.com Inc., Abacus Direct Corp., Sequent Computer
Systems Inc. and Egghead.com Inc.
For instance, in late February, when Henderson learned that Alcatel SA would
acquire Xylan, an investment banking client, he called his friend and told him
to buy Xylan shares, which Randall did, the SEC alleges.
In the civil complaint, the SEC charges the two men with securities fraud
based on illegal insider-trading and seeks to compel them to return their
trading profits, plus interest, and pay a civil penalty of up to three times
their trading gains.
Morrison said the SEC's case demonstrates the agency will take "prompt and
aggressive action against people who steal confidential information from their
employers and trade on it."
The criminal complaint, filed by the U.S. Attorney's Office for the Northern
District of California, charges the two men with conspiracy to engage in
insider trading. If found guilty, each could face a maximum sentence of five
years in prison and fines of up to $250,000.
|
